Property & Family

When family helps with the deposit.

With house prices requiring ever-larger deposits, family help has become common. But money changing hands within families creates legal complexities that need careful structuring from the start.

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The Challenge

Why this needs careful thought.

Family financial help feels simple in the moment. But without clear documentation, that simple arrangement can become complicated when circumstances change.

Relationship breakdown

If the relationship between the property owners ends, what happens to the family contribution? Without documentation, the family's money may simply become part of the relationship property pool.

Death of a party

If the child who received help passes away, does the contribution go to their partner, their siblings, or back to the parents? Clear documentation prevents disputes.

Multiple children

If you help one child with a deposit, what about the others? Is this an advance on their inheritance? Will it be taken into account later?

Changed circumstances

Parents may need the money back for retirement or care costs. What seemed affordable when given may become necessary later.

The Key Decision

Gift vs Loan.

The fundamental question is whether the money is a gift or a loan. This distinction affects everything that follows.

Gift

Outright transfer, no repayment expected

No gift duty in New Zealand
Generally becomes relationship property if used for family home
Cannot be recalled if parents need it later
May affect rest home subsidies if given within certain timeframes
Simple to document but irreversible

Once given: The money belongs to the recipient entirely. The gifting parent has no legal claim.

Loan

Creates obligation to repay

Can be interest-free or carry interest
Remains a debt, protecting the family's asset
Can be called in if parents need it
Should be documented with clear terms
Can be forgiven later (converting to gift) or repaid

Flexibility: A loan can always be forgiven later, but a gift cannot be converted back to a loan.

Our recommendation

In most cases, structuring family help as a loan provides better protection for everyone. The loan can always be forgiven later, but a gift cannot be converted back to a loan. Starting with a loan preserves flexibility.

Important Consideration

Relationship property rules.

New Zealand's Property (Relationships) Act 1976 generally treats the family home as relationship property, to be divided equally if the relationship ends. This applies regardless of who contributed what.

Gifts to one partner

Generally become relationship property when used for the family home. On separation the value is divided equally.

Loans from family

A properly documented loan remains a debt secured against the property. On separation, the debt is repaid before remaining equity is divided.

Contracting out

Partners can agree that certain contributions remain separate property. Requires independent legal advice for both parties.

Timing matters

Documentation should be in place before the money changes hands. Agreements made after the contribution are harder to enforce and may be challenged.

If you are planning to help, talk to a lawyer first, not after.

Common Concerns

Questions from both generations.

Family property arrangements raise concerns on both sides. Good documentation addresses these so everyone can move forward with confidence.

Parents often ask

Will we get this back if we need it for retirement or care?

What happens to our money if our child's relationship ends?

Is this fair to our other children?

How does this affect our own estate planning?

Children often ask

Do my parents have a say in how we use the property?

What does my partner need to agree to?

Will this affect my relationship with my siblings?

Can my parents ask for it back?

Having these conversations early, with professional guidance, prevents misunderstandings and protects family relationships. A lawyer can help facilitate these discussions.

Practical Matters

Bank requirements.

Banks have specific requirements when family money forms part of a deposit.

Gifting certificates

If the money is a gift, banks require a signed statement from the giver confirming it is a gift with no expectation of repayment. Sometimes called a "gift declaration."

Loan documentation

If the money is a loan, banks need to understand the terms. Interest-free loans with no set repayment date are generally acceptable. Regular repayment obligations may affect borrowing capacity.

Source of funds

Anti-money laundering rules require banks to verify the source of deposits. Your parents or family members may need to provide evidence of where the money came from.

Guarantor arrangements

Sometimes parents guarantee the mortgage rather than providing cash. Parents remain liable for the loan but don't have funds tied up in the property.

Key Takeaways

Family help with deposits is common but needs careful structuring

Loans generally provide better protection than gifts and can be forgiven later

Undocumented contributions may be divided equally on separation

Property sharing agreements prevent disputes when family co-own property

Banks have specific requirements for family contributions

Documentation should be in place before money changes hands

Related Guide

Buying your first home with family help? Our step-by-step guide covers everything from finance to settlement, including structuring family contributions.

Read the First Home Buyer's Guide